Eurasian Energy Politics Intensify

Newscasts and newspapers these days are filled with reports about a feud between Japan and China over island claims, skirmishes among many Pacific nations for position to control enormous oil and gas reserves in the South China sea, and the redeployment and buildup of U.S. military forces elsewhere in the Pacific, a region officially declared to be of primary concern.

In energy, however, the biggest recent news was the announcement two weeks ago of a US $13 billion deal between Russia and Japan to build a natural gas terminal in Japan to receive exports from Russia. Commenting on the agreement, which was unveiled during a meeting of the Asia Pacific Economic Council (APEC) in Vladivostok, Gazprom chairman Aleksie Miller said that he expects the company's exports to Asia to exceed its shipments to Europe within a few years.

Gazprom, by far the world's leading natural gas company and by far the most important company in Russia, currently meets about a quarter of Europe's gas needs. Wary of that dependence, given Russia's repeated use of gas curtailments to get its way in disputes with former satellites and provinces, Europe has been seeking to diversify its suppliers. The Vladivostok agreement explicitly signals what gas market experts have been expecting, namely, that Russia can diversify too.

In interviews before the conference, Russian president Vladimir Putin said that at present Russia's economic relations with Asian countries are not commensurate with its geographic position. “Two-thirds of Russian territory is located in Asia, and yet the bulk of our foreign trade—more than 50 percent—comes from Europe, whereas Asia only accounts for 24 percent,” Putin told Russia Today. In his speech at the APEC meeting, Putin indicated Russia is now executing a pivot toward Asia, in effect an answer not only to Europe's maneuvers but to the U.S.–Asia pivot that President Barack Obama announced at the previous APEC meeting, last year in Hawaii. So notes energy specialist Michael Klare, author of a recent book on growing resource scarcity and a professor of world security studies based at Hampshire College in Massachusetts.

Klare was an invited panelist at the APEC conference, an annual event that brings together top political leaders and corporate leaders in parallel meetings. He says the Russian delegation treated Europe as a stagnant, unpromising market and Asia as the region where the real action is. The delegation's star, and indeed the star of the whole conference, was Putin himself. Klare says he came across like a top corporate CEO playing at the of his game, completely relaxed and able to reel off reams of detailed factual information and statistics about the energy sector.

As I've written elsewhere, despite the unprecedented political opposition he is facing at home, Putin obviously is not planning to go away and, more than ever, will be a force to be reckoned with.